The Journal: How Elon Musk Rescued X From the Brink Release Date: April 16, 2025
Introduction In the latest episode of The Journal, Jessica Mendoza and Alexander Saidi delve into the tumultuous journey of X—the platform formerly known as Twitter—and how Elon Musk orchestrated its dramatic comeback. Acquired in 2022 for a staggering $44 billion, X faced significant challenges, including mass user departures and a exodus of advertisers. This comprehensive summary outlines the key discussions, insights, and strategic maneuvers that led to X's resurgence under Musk's leadership.
Elon Musk’s Acquisition and Initial Struggles Elon Musk's acquisition of Twitter in late 2022 marked the beginning of a challenging era for the social media giant. Shortly after the purchase, Musk rebranded the platform as X and initiated substantial layoffs, including dismantling the content moderation team. These drastic changes led to a rapid decline in user trust and advertiser confidence. Jessica Mendoza highlights the severity of the situation:
"Musk said Twitter was... quickly losing money and filing for bankruptcy is not out of the question." [00:24]
Alexander Saidi adds that the financial strain extended to the banks that financed the deal, expressing their reluctance to keep their capital tied up in X's struggling operations:
"The world's richest man bought the social media platform. Last week, nearly a million Twitter users leave... it was a really tough deal for the banks." [00:16, 01:03]
Financial Turmoil and Banking Challenges Musk's acquisition involved a significant financial burden. He invested approximately $30 billion of his own funds and secured an additional $13 billion through loans from major banks like Morgan Stanley and Bank of America. As X began to falter, these banks found themselves burdened with substantial debt tied to a plummeting asset.
"The banks were stuck holding debt that... they don't want to, you know, have their money tied up in these loans." [01:03]
Strategic Alliance with Donald Trump A pivotal moment in X's turnaround was Musk's strategic alliance with former President Donald Trump. By endorsing Trump and financially supporting his re-election campaign with over $250 million, Musk positioned himself favorably within political circles. This alliance sparked investor enthusiasm, particularly among those optimistic about Trump's pro-business policies.
"Musk capitalized on a wave of investor enthusiasm... X kind of looked like another Trump trade." [03:55, 04:18]
Reclaiming Advertisers and Revenue Recovery Leveraging his political connections and renewed investor confidence, Musk successfully enticed major advertisers back to X. Noteworthy companies like Amazon and Apple resumed their advertising efforts on the platform, reversing previous departures.
"Advertisers who hadn't been on the platform in a while were willing to come back... Amazon announced that they would come back." [04:25, 04:54]
Mendoza explains that these developments significantly improved X's revenue streams:
"Revenue has started to tick back up... aggressive cuts Musk had made early on also helped the company's finances to recover." [06:14]
Political Leverage and Influence X's enhanced relationship with the administration provided Musk with additional leverage over advertisers. An incident involving the advertising firm Interpublic showcased how Musk wielded political influence to secure more ad spending for X.
"A lawyer from X called a lawyer at this advertising group... 'Your deal to merge could face trouble given Musk's sort of powerful role there.'" [05:37, 05:56]
While Interpublic denied making spending commitments based on these interactions, the incident highlighted the intertwined nature of business and politics in X's recovery strategy.
Debt Restructuring and Financial Stabilization To alleviate the financial strain, the banks involved in X's acquisition attempted to sell off Musk's debt. Contrary to expectations, these efforts were highly successful. Initially aiming to sell $3 billion of debt, the banks ultimately offloaded $10 billion, signaling strong market confidence in X's financial stability.
"The debt sale shows just how far X has come in the past year." [07:14, 08:01]
The Rise of XAI and Integration with X In 2023, Musk founded XAI, an artificial intelligence company renowned for its AI chatbot, Grok. XAI's synergy with X proved advantageous, as the social media platform provided vast amounts of real-time data essential for training AI models. This interconnection extended to resource sharing, with X supplying XAI with computer chips and other critical hardware in exchange for stock, further intertwining the two entities.
"XAI has trained itself off of X Twitter data... one key advantage XAI can boast is its connection to Musk's other companies." [09:05, 10:01]
Employees began holding dual roles in both companies, reflecting Musk's strategic focus on integrating his ventures to bolster their collective strengths.
Merger of X and XAI: The Vision for an Everything App Musk's grand vision culminated in the merger of X and XAI, announced at over $100 billion in combined valuation. This unprecedented move was facilitated by the same law firm and bank advising both companies, a rare occurrence intended to streamline the merger process. The unified entity aims to realize Musk's ambition of creating an "Everything app" where users can handle payments, messaging, news consumption, and more within a single platform.
"The combined valuation of the two companies was over $100 billion... creating what he calls the Everything app." [12:52, 13:11]
Saidi emphasizes that this merger represents a significant step towards integrating various services, leveraging XAI's computing power to drive innovation within X.
"With X and Xai as one, it will move more in that direction. Xai can be the computing power that makes all of the Everything happen." [13:11]
Analyzing Musk’s Business Acumen The episode concludes with an analysis of Musk's strategic prowess. Saidi commends Musk for making calculated bets that paid off, such as aligning with influential political figures and optimizing resource allocation across his companies. Nonetheless, he cautions that future challenges remain, and the sustainability of X and XAI's success is yet to be fully tested.
"He can make a few good bets and have them pay off... but who knows what the future holds?" [14:05, 14:18]
Conclusion Elon Musk's ability to navigate X from the brink of bankruptcy to a thriving, multifaceted platform underscores his unique approach to business and his knack for leveraging political and financial networks. The merger with XAI not only solidifies X's position in the social media landscape but also paves the way for innovative integrations that could redefine digital interactions. As X continues to evolve, the outcomes of Musk's ambitious strategies will undoubtedly remain a focal point for investors, users, and industry observers alike.